Value chains and domestic competitiveness

Publication date: 29 Apr 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | External Author(s): Gasiorek, M; Smith, A; Tamberi, N | JEL Classification: F6, F14, F15, F17; F42 | Journal: National Institute Economic Review Issue 252 | Publisher: Cambridge University Press

With international trade increasingly undertaken within vertically fragmented supply chains, this paper considers the impact of changes in trade costs on domestic output. In the context of the UK’s exit from the EU we show that the negative impact on UK output will depend on changes in both domestic and export competitiveness. Since for many firms the majority of their sales are to the domestic market, the domestic competitiveness impact may be quantitatively more important. The impact on output will be more significant the greater the integration of firms in international supply chains, and the greater the asymmetric impact of leaving the EU on UK firms relative to EU firms. 

Keyword tags: 
Economic impacts of globalisation
Empirical studies of trade
economic integration
Trade forecasting and simulation
International policy coordination and transmission

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